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Domino Effect of Third Party Insurance

Offering lower premiums on third party insurance schemes have recently disrupted the insurance market. Compulsory third party motor vehicle insurance is the main insurance product in Iran’s insurance industry, taking up over half total premiums received annually. While on first sight it may seem that the significant amount should be to the benefit of insurance companies, however, official statistics indicate that insurance companies suffer considerable loss through third party insurance payments, Banker reports.

Bimeh Markazi or the Central Insurance has announced that during the first seven months of the fiscal year that began on March 21, 2014, third party insurance compensations accounted for 40.6% of the overall amount of insurance payments. The substantial loss is neither new nor surprising to insurance experts, according to Banker.

The insurance policy has incurred serious loss for insurance companies, some experts say. As long as insurance regulations are not amended by the parliament, and the responsibility of drivers in accidents is neglected, insurance companies will continue to struggle financially.

Overhauling the regulations for third party insurance has long been on the cards, a new impending problem, however, are companies which offer lower premiums on third party insurance schemes. While at first such measures might haul in revenues in plenty, in the long run, given the high costs which third party insurance schemes entail, these companies will face resource deficits and fail to fulfill their obligations to their customers, the report concluded.